Schmid Emphasizes Continued Concerns Over Inflation

Jeff Schmid, President of the Kansas City Federal Reserve Bank, stated that inflation remains at a concerning level and that price stability is the top priority of monetary policy. He warned that although the recently released price indicators were lower than expected, it is too early to conclude that inflation has eased. Schmid emphasized at the Nebraska Economic Forum on the 16th that current inflation is about twice the Federal Reserve's target of 2%, and monetary policy must continue to focus on prices. He cautioned that the recent slowdown in prices could be temporary and stated that inflation shocks are not inherently temporary. Additionally, he noted that while the decline in international oil prices led to lower-than-expected price indicators, this should not be overinterpreted. Schmid believes that the most important variable in the current U.S. economy is inflation, assessing that price increases are persistent across goods and services. He did not directly support further increases in the benchmark interest rate, and the Federal Reserve is set to hold its FOMC meeting on the 28th and 29th. Some Federal Reserve officials have hinted at the possibility of further rate hikes. Schmid stressed that transparency in the policy-making process is essential to maintain the independence of the Federal Reserve.

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